Life Time Fitness Announces Third Quarter 2008 Financial Results
Company Reports Revenue Growth of 17.3%, Net Income Growth of 17.6%, and Earnings Per Diluted Share of $0.55 for the Quarter
CHANHASSEN, Minn.--(BUSINESS WIRE)--
Life Time Fitness, Inc. (NYSE:LTM) today reported its operating results for the third quarter ended September 30, 2008.
Third quarter 2008 revenue grew 17.3% to $198.8 million from $169.5 million during the same period last year. Net income during the quarter grew 17.6% to $21.6 million, or $0.55 per diluted share. This compares to net income of $18.4 million, or $0.48 per diluted share, for 3Q 2007. For the nine months ended September 30, 2008, revenue grew 18.8% to $575.7 million from $484.7 million during the same period last year. Net income grew 20.1% for the same period to $58.8 million, or $1.49 per diluted share, from $49.0 million, or $1.30 per diluted share, for the first nine months of 2007.
"In the face of pressures impacting all segments of our economy, we are pleased with our third quarter results, which are indicative of continued execution on our key business strategies," said Bahram Akradi, Life Time Fitness chairman and chief executive officer. "Our unique member service and program offerings led to more than 18% in-center revenue growth. We also saw an increase in annual membership growth from the second quarter to third quarter, indicating consumer demand for our facilities and services in spite of challenging economic conditions."
During the third quarter, Life Time Fitness continued its expansion efforts with openings in Rockville, its second location in Maryland; CityCentre, its fourth location in Houston; and Vernon Hills, its ninth location in Illinois. In October, the Company held grand opening events at Mansfield, its eighth location in Dallas, and Loudoun County, its third location in Virginia. Life Time Fitness will hold its final two planned 2008 grand openings in November at Florham Park, its first location in New Jersey, and Westminster, its second location in Colorado.
Three and Nine Months Ended September 30, 2008, Financial Highlights:
Total revenue for the third quarter grew 17.3% to $198.8 million, driven primarily by growth in membership dues and in-center revenue. Total revenue for the first nine months of 2008 grew to $575.7 million from $484.7 million during the same period last year.
YTD 2008 vs.
3Q 2008 vs. 3Q
(Period-over-period growth) 2007 YTD 2007
-------------- ----------------
-- Membership dues 17.4% 18.2%
-- Enrollment fees 4.9% 7.7%
-- In-center revenue 18.2% 21.9%
-- Same-center revenue 3.9% 3.8%
-- Average center revenue / membership $358 - up 3.9% $1,082 - up 6.5%
-- Average in-center revenue /
membership $104 - up 4.8% $ 321 - up 9.2%
Memberships increased 13.2% to 557,164 at September 30, 2008, from 492,410 at September 30, 2007.
Total operating expenses during 3Q 2008 were $156.7 million compared to $131.9 million for 3Q 2007, driven primarily by increased expenses to support new centers, membership growth, and presale activities. Year-to-date operating expenses totaled $457.7 million, compared to $384.9 million for the same period last year.
Operating margin was 21.2% for 3Q 2008 compared to 22.1% in the prior-year period. Year-to-date operating margin was 20.5%, compared to 20.6% in the prior-year period.
YTD 2008 vs.
3Q 2008 vs. 3Q
(Expense as a percent of total revenue) 2007 YTD 2007
---------------- -------------
-- Center operations 58.5% vs. 57.6% 58.6% vs.
58.0%
-- Advertising and marketing 3.7% vs. 3.2% 4.1% vs. 3.8%
-- General and administrative 4.8% vs. 5.8% 5.3% vs. 6.4%
-- Other operating 2.5% vs. 2.5% 2.4% vs. 2.3%
-- Depreciation and amortization 9.4% vs. 8.8% 9.1% vs. 8.9%
Net income during 3Q 2008 grew 17.6% to $21.6 million from $18.4 million in 3Q 2007. For the nine months ended September 30, 2008, net income grew to $58.8 million compared with $49.0 million in the prior-year period.
EBITDA for 3Q 2008 grew 15.9% to $61.2 million from $52.8 million in 3Q 2007. Year-to-date EBITDA grew 19.1% to $171.5 million from $144.0 million for the same period last year.
Cash flows from operations for the first nine months of 2008 totaled $151.0 million, up 40.7% compared with $107.3 million in the prior-year period.
Weighted average fully diluted shares for 3Q 2008 totaled 39.4 million compared to 38.3 million shares in 3Q 2007.
Updated 2008 Business Outlook:
The following statements are based on the Company's current expectations for fiscal year 2008 and subject to the risks and uncertainties described below:
-- Revenue is expected to be $775-$780 million, or approximately
18-19% growth (down from 19-22%, or approximately $780-$800
million), driven primarily by new center growth, membership
ramp at new and existing centers, and in-center revenue
growth.
-- Net income is expected to be $79.0-$80.5 million, or
approximately 16-18% growth (down from 21-23%, or
approximately $82.0-$83.5 million), driven primarily by our
growth strategies.
-- Diluted earnings per common share is expected to be
$2.01-$2.04, or approximately 13-15% growth (down from 16-18%,
or approximately $2.06-$2.09 per share).
The Company will hold a conference call today at 10:00 a.m. ET to discuss its third quarter 2008 results. Bahram Akradi, chairman and chief executive officer, Michael Robinson, executive vice president and chief financial officer, and Kenneth Cooper, vice president of finance, will host the call. The conference call will be Web cast live and may be accessed via the Company's Investor Relations section of its Web site at lifetimefitness.com. A replay of the call will be available today at approximately 1:00 p.m. ET.
About Life Time Fitness, Inc.
Life Time Fitness, Inc. (NYSE:LTM) operates distinctive and large, multi-use sports and athletic, professional fitness, family recreation and resort and spa centers. The company also provides consumers with personal training consultation, full-service spas and cafes, corporate wellness programs, health and nutrition education, the healthy lifestyle magazine, Experience Life, athletic events and nutritional products. As of October 23, 2008, Life Time Fitness operated 79 centers in 17 states, including Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan, Minnesota, Missouri, Nebraska, North Carolina, Ohio, Texas, Utah and Virginia. Life Time Fitness is headquartered in Chanhassen, Minnesota, and can be located on the Web at lifetimefitness.com. LIFE TIME FITNESS, EXPERIENCE LIFE, and the LIFE TIME FITNESS TRIATHLON SERIES are registered trademarks of Life Time Fitness, Inc. All other trademarks or registered trademarks are the property of their respective owners.
Risks & Uncertainties
Certain information contained in this press release may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause the Company's actual results in the future to differ materially from its historical results and those presently anticipated or projected. Among these factors are identifying and acquiring suitable sites for new sports, fitness and family recreation centers, opening new sports, fitness and family recreation centers, attracting and retaining members, obtaining additional financing and other factors set forth in the Company's filings with the Securities and Exchange Commission. Diluted earnings per share could also be affected by the number of shares outstanding, which depends on factors such as the number of shares issued upon exercise of stock options and future grants of awards pursuant to equity-based incentive plans as well as stock offerings. The Company cautions investors not to place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update such statement to reflect events or circumstances arising after such date.
All remarks made during the Company's financial results conference call will be current at the time of the call and the Company undertakes no obligation to update the replay.
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
September December
30, 2008 31, 2007
----------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,119 $ 5,354
Accounts receivable, net 5,318 4,475
Inventories 14,739 14,324
Prepaid expenses and other current assets 15,510 15,963
Deferred membership origination costs 19,280 16,205
Deferred income taxes 2,126 1,188
Income tax receivable - 5,814
----------- -----------
Total current assets 64,092 63,323
PROPERTY AND EQUIPMENT, net 1,451,641 1,259,271
RESTRICTED CASH 9,285 6,767
DEFERRED MEMBERSHIP ORIGINATION COSTS 14,895 14,367
OTHER ASSETS 56,012 42,805
----------- -----------
TOTAL ASSETS $1,595,925 $1,386,533
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 10,222 $ 9,568
Accounts payable 15,921 12,872
Construction accounts payable 86,744 59,261
Accrued expenses 55,430 47,052
Deferred revenue 37,146 34,851
----------- -----------
Total current liabilities 205,463 163,604
LONG-TERM DEBT, net of current portion 636,898 555,037
DEFERRED RENT LIABILITY 26,906 25,526
DEFERRED INCOME TAXES 48,931 38,607
DEFERRED REVENUE 15,415 17,529
OTHER LIABILITIES 21,888 13,673
----------- -----------
Total liabilities 955,501 813,976
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock 794 783
Additional paid-in capital 383,470 373,910
Retained earnings 258,696 199,890
Accumulated other comprehensive loss (2,536) (2,026)
----------- -----------
Total shareholders' equity 640,424 572,557
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,595,925 $1,386,533
=========== ===========
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
-------- --------- -------- ---------
REVENUE:
Membership dues $131,232 $111,744 $377,001 $318,939
Enrollment fees 6,818 6,501 19,991 18,565
In-center revenue 56,151 47,517 167,385 137,305
-------- --------- -------- ---------
Total center revenue 194,201 165,762 564,377 474,809
Other revenue 4,608 3,688 11,290 9,879
-------- --------- -------- ---------
Total revenue 198,809 169,450 575,667 484,688
-------- --------- -------- ---------
OPERATING EXPENSES:
Center operations 116,300 97,626 337,139 281,153
Advertising and marketing 7,287 5,359 23,608 18,167
General and administrative 9,453 9,750 30,707 30,931
Other operating 4,926 4,255 13,696 11,371
Depreciation and amortization 18,720 14,917 52,500 43,282
-------- --------- -------- ---------
Total operating expenses 156,686 131,907 457,650 384,904
-------- --------- -------- ---------
Income from operations 42,123 37,543 118,017 99,784
-------- --------- -------- ---------
OTHER INCOME (EXPENSE):
Interest expense, net (7,185) (7,135) (21,301) (19,032)
Equity in earnings of affiliate 336 316 985 917
-------- --------- -------- ---------
Total other income (expense) (6,849) (6,819) (20,316) (18,115)
-------- --------- -------- ---------
INCOME BEFORE INCOME TAXES 35,274 30,724 97,701 81,669
PROVISION FOR INCOME TAXES 13,700 12,374 38,895 32,700
-------- --------- -------- ---------
NET INCOME $ 21,574 $ 18,350 $ 58,806 $ 48,969
======== ========= ======== =========
BASIC EARNINGS PER COMMON SHARE $ 0.55 $ 0.49 $ 1.51 $ 1.32
======== ========= ======== =========
DILUTED EARNINGS PER COMMON SHARE$ 0.55 $ 0.48 $ 1.49 $ 1.30
======== ========= ======== =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES
OUTSTANDING - BASIC 39,025 37,630 38,946 37,061
======== ========= ======== =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES
OUTSTANDING - DILUTED 39,370 38,309 39,350 37,651
======== ========= ======== =========
LIFE TIME FITNESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Nine Months
Ended
September 30,
--------------------
2008 2007
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 58,806 $ 48,969
Adjustments to reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization 52,500 43,282
Deferred income taxes 8,094 4,856
Provision for doubtful accounts 15 105
Loss on disposal of property and equipment, net 1,159 281
Amortization of deferred financing costs 1,078 628
Share-based compensation 5,989 5,671
Excess tax benefit from stock option exercises (38) (4,501)
Equity in earnings of affiliate (985) (917)
Changes in operating assets and liabilities 24,328 8,953
Other 54 17
--------- ----------
Net cash provided by operating activities 151,000 107,344
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (excluding non-cash
purchases
supplementally noted below) (360,551) (310,478)
Proceeds from sale of property and equipment 161,885 4,664
Gain on sale leaseback transactions (7,488) -
Proceeds from property insurance settlements 317 48
Increase in other assets (6,443) (6,568)
Increase in restricted cash (2,518) (2,253)
--------- ----------
Net cash used in investing activities (214,798) (314,587)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 39,188 105,000
Repayments of long-term borrowings (13,043) (9,279)
Proceeds from revolving credit facility, net 42,500 2,800
Increase in deferred financing costs (6,113) (2,008)
Proceeds from common stock offering, net of underwriting
discount
and offering costs - 92,510
Excess tax benefit from stock option exercises 38 4,501
Proceeds from stock option exercises 2,993 7,612
--------- ----------
Net cash provided by financing activities 65,563 201,136
--------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,765 (6,107)
CASH AND CASH EQUIVALENTS - Beginning of period 5,354 6,880
--------- ----------
CASH AND CASH EQUIVALENTS - End of period $ 7,119 $ 773
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for interest, net of capitalized
interest $ 19,555 $ 17,845
========= ==========
Cash payments for income taxes $ 18,839 $ 24,982
========= ==========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Purchases of property and equipment financed
through capital
lease obligations $ 12,294 $ -
========= ==========
Purchases of property and equipment in accounts
payable $ 28,909 $ 2,548
========= ==========
Non-cash share-based compensation capitalized to
projects
under development $ 552 $ 522
========= ==========
Non-GAAP Financial Measures
This release contains a non-GAAP disclosure, EBITDA, which consists of net income plus interest expense, net, provision for income taxes and depreciation and amortization. This term, as the Company defines it, may not be comparable to a similarly titled measure used by other companies and is not a measure of performance presented in accordance with GAAP. The Company uses EBITDA as a measure of operating performance. The funds depicted by EBITDA are not necessarily available for discretionary use if they are reserved for particular capital purposes, to maintain compliance with debt covenants, to service debt or to pay taxes. EBITDA should not be considered as a substitute for net income, cash flows provided by operating activities or other income or cash flow data prepared in accordance with GAAP. Additional details related to EBITDA are provided in the Form 8-K that the Company filed with the Securities and Exchange Commission on the date of this press release.
The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to EBITDA:
RECONCILIATION OF NET INCOME TO EARNINGS BEFORE INTEREST,
INCOME TAXES AND DEPRECIATION AND AMORTIZATION
(In thousands)
(Unaudited)
For the For the
Three Months Nine Months Ended
Ended
September 30, September 30,
--------------- -----------------
2008 2007 2008 2007
------- ------- -------- --------
Net income $21,574 $18,350 $ 58,806 $ 48,969
Interest expense, net 7,185 7,135 21,301 19,032
Provision for income taxes 13,700 12,374 38,895 32,700
Depreciation and amortization 18,720 14,917 52,500 43,282
------- ------- -------- --------
EBITDA $61,179 $52,776 $171,502 $143,983
======= ======= ======== ========
Source: Life Time Fitness, Inc.
Released October 23, 2008